Ky.BrownBourbn
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Twenty-Three Years Ago, Delta Pulled The Plug On Pan Am
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Ted Reed Contributor
Twenty-three years ago, on Dec. 4, 1991, Delta revealed its decision not to honor its commitment to fund a new Miami-based Pan Am, and the historic carrier shut down.
Many were taken by surprise, including negotiators for Pan Am and its unions, who had stayed up all night to iron out the details of the new carrier?s labor agreement, only to learn when they arrived in bankruptcy court that their efforts had been in vain.
In retrospect, perhaps Pan Am, which was burning through money, should have seen it coming.
Months before Dec. 4, Ray Anton, a 24-year Pan Am veteran who was the Miami-based director of maintenance planning in 1991, had suspected something was fishy.
?During the last months of Pan Am I was given the task of coordinating the move of equipment and personnel from JFK to MIA for Pan Am 2,? as well as moving other equipment to Atlanta because Delta was taking over the trans-Atlantic routes,? Anton said in an email. Anton called new Pan Am, which would primarily serve South America from a Miami hub, ?Pan Am 2.?
At first, ?All of us with Pan Am in Miami shared sense of relief and optimism for the future,? Anton said. ?After years of losses and negativity, we saw light at the end of the tunnel.
?But by late October 1991 I began to worry as Russ Ray would not approve any of the requests to remodel the maintenance/engineering, operations and facilities at MIA to house the new Pan Am or to move equipment from JFK to MIA,? said Anton, referring to Russell Ray, who had been named president and CEO of new Pan Am.
Early in November, 1991, Leon Marcus, attorney for the Pan Am creditors, accused Delta of threatening new Pan Am?s startup with delay and millions of dollars in unexpected costs. After The Miami Herald obtained a copy of the letter detailing Marcus? charges, the newspaper reported that in three months, Pan Am lost between $160 million and $170 million, which had forced Delta to advance more money than it had originally anticipated,
?During Thanksgiving week 1991, Ray asked me to develop a contingency plan ?in case? the deal failed, including parking of aircraft, orderly dismissal of employees, security, returning aircraft to owners, etc.,? Anton said. ?He even asked me if I would be willing to stay over to work in that effort. I was speechless, in shock and he jumped in and assured me this was only ?an exercise? before I could say a word.
?I went home, cried a little and told my wife that we were going under,? he said.
After the shutdown, Anton stayed with Pan Am for a year to work on liquidating the airline, He then became a consultant. He never flew Delta again. Yet now, he says, ?I find myself buying and trading Delta stock. ? Shares are up 63% this year.
In January 1992, the Pan Am creditors committee decided to replace Ray, who had spent just 100 days as president. Ray ?found himself dismantling the airline he had worked to save,? The Los Angeles Times reported that month. Ray was a former Douglas Aircraft executive from California.
Ray told the newspaper he had received some unpleasant surprises after a few weeks on the job at Pan Am. Among them, revenues were less than expected, the airline was losing $3 million a day, and the expectation of becoming financially stable by the end of 1991, envisioned in the reorganization plan, seemed unrealistic.
?It?s something that sounds stupid,? Ray told the newspaper. ?But I probably should have made some deeper inquiries about the business plan.?
?During the weekend after Thanksgiving, as Pan Am prepared to emerge from bankruptcy court, Delta officials told Ray that they would stop advancing Pan Am cash,? the LA Times reported. ?Delta had already sunk more than $100 million into Pan Am, which had failed to stem its losses and increase passenger reservations.?
On the morning of Dec. 4, Ray gave the order to shut it down. ?Those are three terrible words,? Ray said. ?You just choke on them.?
For the 1992 story, Ray noted that, in his view, just four or five airlines would survive industry consolidation. This proved prescient.
Five days after the shutdown, Pan Am filed a $2.5 billion lawsuit against Delta, claiming that Delta illegally backed away from its commitment to finance its bankruptcy emergence. Anton offered depositions and testimony. In 1994, Delta won the court battle when U.S. District Court Judge Robert Patterson ruled Delta was not liable.
One more note: In February 1995, in a story entitled ?How Delta Flew Circles Around Pan Am in Court,? Business Week reported that in Patterson, Delta had found the judge it wanted. The magazine credited New York attorney Dennis Glazer, saying he ?spearheaded an elaborate three-year legal strategy for Delta that entailed everything f
Dennis Glazer for ?everything from forum-shopping to investigating judges? backgrounds.
?These maneuvers were neither illegal nor unethical,? Business Week said. ?They merely took advantage of an imperfect, malleable system. Similar high-stakes legal maneuvering goes on everywhere. ?
When U.S. Bankruptcy Court Judge Cornelius Blackshear, who oversaw the Pan Am bankruptcy, told lawyers he did not have time to hear the case against Delta, ?Blackshear handed Delta a gift,? BusinessWeek said.
One more note: In February 1995, in a story entitled ?How Delta Flew Circles Around Pan Am in Court,? Business Week reported that in Patterson, Delta had found the judge it wanted. The magazine credited New York attorney Dennis Glazer, saying he ?spearheaded an elaborate three-year legal strategy for Delta that entailed everything f
Dennis Glazer for ?everything from forum-shopping to investigating judges? backgrounds.
?These maneuvers were neither illegal nor unethical,? Business Week said. ?They merely took advantage of an imperfect, malleable system. Similar high-stakes legal maneuvering goes on everywhere. ?
When U.S. Bankruptcy Court Judge Cornelius Blackshear, who oversaw the Pan Am bankruptcy, told lawyers he did not have time to hear the case against Delta, ?Blackshear handed Delta a gift,? BusinessWeek said.
Comment Now Follow Comments
Ted Reed Contributor
Twenty-three years ago, on Dec. 4, 1991, Delta revealed its decision not to honor its commitment to fund a new Miami-based Pan Am, and the historic carrier shut down.
Many were taken by surprise, including negotiators for Pan Am and its unions, who had stayed up all night to iron out the details of the new carrier?s labor agreement, only to learn when they arrived in bankruptcy court that their efforts had been in vain.
In retrospect, perhaps Pan Am, which was burning through money, should have seen it coming.
Months before Dec. 4, Ray Anton, a 24-year Pan Am veteran who was the Miami-based director of maintenance planning in 1991, had suspected something was fishy.
?During the last months of Pan Am I was given the task of coordinating the move of equipment and personnel from JFK to MIA for Pan Am 2,? as well as moving other equipment to Atlanta because Delta was taking over the trans-Atlantic routes,? Anton said in an email. Anton called new Pan Am, which would primarily serve South America from a Miami hub, ?Pan Am 2.?
At first, ?All of us with Pan Am in Miami shared sense of relief and optimism for the future,? Anton said. ?After years of losses and negativity, we saw light at the end of the tunnel.
?But by late October 1991 I began to worry as Russ Ray would not approve any of the requests to remodel the maintenance/engineering, operations and facilities at MIA to house the new Pan Am or to move equipment from JFK to MIA,? said Anton, referring to Russell Ray, who had been named president and CEO of new Pan Am.
Early in November, 1991, Leon Marcus, attorney for the Pan Am creditors, accused Delta of threatening new Pan Am?s startup with delay and millions of dollars in unexpected costs. After The Miami Herald obtained a copy of the letter detailing Marcus? charges, the newspaper reported that in three months, Pan Am lost between $160 million and $170 million, which had forced Delta to advance more money than it had originally anticipated,
?During Thanksgiving week 1991, Ray asked me to develop a contingency plan ?in case? the deal failed, including parking of aircraft, orderly dismissal of employees, security, returning aircraft to owners, etc.,? Anton said. ?He even asked me if I would be willing to stay over to work in that effort. I was speechless, in shock and he jumped in and assured me this was only ?an exercise? before I could say a word.
?I went home, cried a little and told my wife that we were going under,? he said.
After the shutdown, Anton stayed with Pan Am for a year to work on liquidating the airline, He then became a consultant. He never flew Delta again. Yet now, he says, ?I find myself buying and trading Delta stock. ? Shares are up 63% this year.
In January 1992, the Pan Am creditors committee decided to replace Ray, who had spent just 100 days as president. Ray ?found himself dismantling the airline he had worked to save,? The Los Angeles Times reported that month. Ray was a former Douglas Aircraft executive from California.
Ray told the newspaper he had received some unpleasant surprises after a few weeks on the job at Pan Am. Among them, revenues were less than expected, the airline was losing $3 million a day, and the expectation of becoming financially stable by the end of 1991, envisioned in the reorganization plan, seemed unrealistic.
?It?s something that sounds stupid,? Ray told the newspaper. ?But I probably should have made some deeper inquiries about the business plan.?
?During the weekend after Thanksgiving, as Pan Am prepared to emerge from bankruptcy court, Delta officials told Ray that they would stop advancing Pan Am cash,? the LA Times reported. ?Delta had already sunk more than $100 million into Pan Am, which had failed to stem its losses and increase passenger reservations.?
On the morning of Dec. 4, Ray gave the order to shut it down. ?Those are three terrible words,? Ray said. ?You just choke on them.?
For the 1992 story, Ray noted that, in his view, just four or five airlines would survive industry consolidation. This proved prescient.
Five days after the shutdown, Pan Am filed a $2.5 billion lawsuit against Delta, claiming that Delta illegally backed away from its commitment to finance its bankruptcy emergence. Anton offered depositions and testimony. In 1994, Delta won the court battle when U.S. District Court Judge Robert Patterson ruled Delta was not liable.
One more note: In February 1995, in a story entitled ?How Delta Flew Circles Around Pan Am in Court,? Business Week reported that in Patterson, Delta had found the judge it wanted. The magazine credited New York attorney Dennis Glazer, saying he ?spearheaded an elaborate three-year legal strategy for Delta that entailed everything f
Dennis Glazer for ?everything from forum-shopping to investigating judges? backgrounds.
?These maneuvers were neither illegal nor unethical,? Business Week said. ?They merely took advantage of an imperfect, malleable system. Similar high-stakes legal maneuvering goes on everywhere. ?
When U.S. Bankruptcy Court Judge Cornelius Blackshear, who oversaw the Pan Am bankruptcy, told lawyers he did not have time to hear the case against Delta, ?Blackshear handed Delta a gift,? BusinessWeek said.
One more note: In February 1995, in a story entitled ?How Delta Flew Circles Around Pan Am in Court,? Business Week reported that in Patterson, Delta had found the judge it wanted. The magazine credited New York attorney Dennis Glazer, saying he ?spearheaded an elaborate three-year legal strategy for Delta that entailed everything f
Dennis Glazer for ?everything from forum-shopping to investigating judges? backgrounds.
?These maneuvers were neither illegal nor unethical,? Business Week said. ?They merely took advantage of an imperfect, malleable system. Similar high-stakes legal maneuvering goes on everywhere. ?
When U.S. Bankruptcy Court Judge Cornelius Blackshear, who oversaw the Pan Am bankruptcy, told lawyers he did not have time to hear the case against Delta, ?Blackshear handed Delta a gift,? BusinessWeek said.
